A heavy discount continues to plague French assets and Prime Minister Francois Bayrou’s attempt to tackle the ongoing political crisis has been far from enough to bring investors back. Their return requires a concrete plan to slash the country’s gaping budget deficit.
French assets never recovered from the hit sustained over six months ago, when President Emmanuel Macron called snap elections. The CAC 40 stock index is underperforming several other major European benchmarks this year and the cost to insure debt against default is rising. The extra yield investors demand to hold French, not German, bonds is around 80 basis points — nearly twice as much as before the ballot. Meanwhile, trading activity on the French market has been sharply lower since August.
